Eduardo Azevedo"Market Failure in Kidney Exchange" joint w/ Clayton Featherstone, Nikhil Agarwal, Itai Ashlagi, Omer Karaduman
ABSTRACT: The market for kidney exchange was created to address the shortage of kidneys for transplantation. The participants in kidney exchange markets are patients who want to receive a kidney transplant, and have a willing but incompatible live donor. These patients register in kidney exchange platforms, where they perform donor swaps with other patients. This market has grown to about 800 transplants per year.
We show that this market is fragmented. Transactions take place in dozens of platforms, which are mostly very small, as opposed to in a few large platforms. This fragmentation leads to a deadweight loss of at least 200 transplants per year, because the size of most existing platforms is far below the efficient scale necessary for efficiently matching patients. The fragmentation is due to classic market failures, and simple alternative mechanisms can considerably increase efficiency.